Wednesday, 25 May 2016
Last updated 2 hours ago
Feb 20 2009 | 1:05am ET
The bankruptcy trustee for Polaroid Corp. is suing a pair of hedge funds, accusing them of abetting a massive fraud in an effort to squeeze value out of the camera company.
Polaroid is owned by Tom Petters, the accused hedge fund fraudster charged with ripping investors off to the tune of $3 billion. According to the lawsuit, Acorn Capital Group and Ritchie Capital Management, creditors of Polaroid, conspired with Petters to extract liens and other guarantees from Polaroid before the scandal broke.
The lawsuit, filed in federal court in Minneapolis, says Petters forced Polaroid into bankruptcy to transfer money and liens to cover debts. It alleges "orchestrated efforts of Ritchie Capital to cover substantial investment losses and prefer its individual interests at the expense of Polaroid, its creditors and other stakeholders."
Ritchie, no stranger to the courtroom in recent years, denied any wrongdoing.
“At no time when the loans were advanced, and the liens to secure such loans granted, did the Ritchie entities have any knowledge that Petters and any related corporations were engaged in any fraudulent conduct,” the hedge fund said in a statement. “The Ritchie entities believe the lawsuit filed against them by Polaroid is without merit and that Ritchie's claims and liens will be upheld.”
"On or about September 19, 2008, literally days before or after the Ponzi scheme collapsed, Ritchie Capital, the Ritchie Group and Thomas J. Petters orchestrated a series of transactions targeted at securing the value of Polaroid and other assets owned or controlled by Thomas Petters in a final-hour attempt to shore up, conceal and cover millions of dollars in losses," the complaint alleges. "Ritchie Capital, the Ritchie Group and Thomas J. Petters unfairly used their leverage, information and positions in an attempt to keep the Petters empire afloat and extract value from Polaroid and other assets through a series of overreaching agreements and avoidable transfers made to or for the benefit of Ritchie Capital and the Ritchie Group."
Acorn has loaned Petters some $281 million—and had sued him just before his September arrest—while Ritchie’s exposure was about $189 million.
In the meantime, Polaroid has won court approval of its plan to sell off its assets next month. U.S. Bankruptcy Judge Gregory Kishel gave the go-ahead for the March 30 auction on Wednesday.